Social Icons

Saturday, January 7, 2012

My deb situation on date of January 6, 2012

8 371.27$ at a low interest rate of 4.75% (RRSP credit line rates) = 397.64$ in annual interest

4 800$ at a low interest rate of 4% (credit line rates) = 192$ in annual interest

7 756.82$ on a credit card at a low interest rate of 2.9% (result of a credit card balance transfer) = 224.95$ in annual interest

7 050.55$ at low interest rate loan at 5.50% (student loan) = 387.78$ in annual interest

5 000$ at 8.75% (credit line) = 437.50$ in annual interest PAID OFF

8 943.30$ at 7.52% (credit line rates) = 672.54$ in annual interest

49 911.02$ at a low interest rates of 4.25% (margin money coming from my broker account): =
2 121.22$ in annual interest

TOTAL: 86 832.96$

TOTAL in annual interest: 3 996.13$
[In date of January 6, 2012]


Ruth said...

ah Sunny, too much interest money, pay it first...the student loan i can understand but all that other stuff, i would rather have that paid as it is money in your hand and not their's. pay it first before more stocks or put the dividents towards debt.

Anonymous said...

Ruth is right. It's pretty unlikely you're going to make more than 5% from your investments, so you're just lighting money on fire by holding debt at 4% or more. I mean, last year you made less than 0% from the market while paying out around 4% for that privilege. That's financial insanity.

Sunny said...

I think you have forget that I DO have calculate the interest paid on debt on that 0% return.

Ruth said...

then if added the interest paid , you would have that money to the good if you paid your debts..the student loan i can understand but this other work too hard to just throw it away on interest on anything except a house.

Anonymous said...

Yeah but everyone knows math is not your strong subject.

You say 0% return but that's only on stocks you sold. The one you still own are down much more like ECA, DGI, hell you know the list. That's why your net worth is down. So basically you paid interest to the banks to buy stocks that has since lost up to 50% of their value.

If you borrow 50k and buy stocks for 50k and they don't go up or down, your net worth stays the same. If the stocks goes up, your net worth increase, if they go down (like they did), your net worth decrease.

It's not that hard to comprehend, the only one that made money last year was TD . Your net worth has decreased, that's the important figure.

If someone borrowed 500k to buy a house in 2008, and today it's only worth half at 250k, basically, he's down 250k. That's the same for your stock that are down this year. They might go back up in the future, like the house in the US, but today they're worth less and is a loss for the year. If you wouldn't have suffered losses, you wouldn't have been worried about margin call all year.

This is your quote
"My net worth could have increased in a good market condition. 2011 had been even worst than 2008 because in 2011, we had multiple crashes. In 2008, we had one major crash. Following what, the stock market gain in value. I had good result in 2009 and 2010, but not in 2011. If you invest in stocks, don't ever imagine that you can win all the way each years. There's good year, and bad year.

1. You think we had multiple crash. We had a volatile year, but no crash. TSX is down just 11%, not 35% like in 2008. If you think we had a crash in 2011, it's because you're not properly invested. The reason you think 2011 was worse is because you're too leveraged (too many stocks bought with debt), while in 2008, you didn't have any margins.

2. You say, it could have increased, but the fact is it decreased more that the 11% loss of the TSX. Anyone can make money in a good year. What's important is how you protect your capital in a bad year. Investing with margins and no fixed income in your portfolio is not a way to protect your capital.

3.You say you had good results in 2009 and 2010, but you have yet to earn any money from your investments. You would have been better off invested in GICS with a 3% return annually.

Funny, lots of people warned you about margin at the beginning of the year and what they said came through. You taught the beginning of 2011 was a good time to buy stocks with credit and it turned out, you could've bought them much cheaper at the end of 2011.

You may not like it, but those are the facts.

The accountant
The accountant

Ruth said...

sometimes i get the feeling sunny that you are mostly interested in building dividends....i think dividends are fine as long as the capital is preserved and that is a must or as i have said just are paying yourself. how i wish the interest rates were higher...i love it when my house cheque comes as it is over 5%..that will change next year and i will invest it again in mistake on that one. if like the accountant says..the 3% GIC looks pretty darn good to the figures you have.

Ruth said...

i wonder though, if the buy and hold stradegy is a good idea...JE sold when it reached $15 or Pengrowth when it was way up along with other ones...if the profit on these small funds is there, i have the feeling "sell". i know i am overweight on pipelines...i do not have one pipeline that is down...interpipe, sea drill pembina,enbridge , all with good these to me are hold. i hope!

Anonymous said...

Agreed with Accountant.
Sunny: your chart is confusing. It doesn't tell me what debt is servicing what, therefore, I have to guess as to what COB can be written off & what can't. The credit card debt is nonsense. The 7.5% interest debt is nonsense. Plus I agree with Accountant that what comes out in the wash, after borrowing costs, regardless of divi's accumulated, is Net Worth> If u had to liquidate today, how much would u be worth. How much were u worth on this day last year. Was there a gain or a decrease. If there was a gain or a loss where did it come from. Sales (capital gains/losses)? Income (interest, divi's)? Gain/Loss in investment value? Added/infusion investment $ (capital)?

Anonymous said...

Sunny had a net worth of 78k at dec 31, 2010 and as of her latest update of jan 6, 74k. That's a decrease of 4k, plus all the infusion of new capital during 2011 which I estimate to be around 10k. And this is as of jan 6 after the market has been up last week. As of dec 31, the loss was even greater. But Sunny's in denial and think she broke even last year.

The accountant

Anonymous said...

The Accountant rocks! Sunny is on drugs....

Anonymous said...

Hi all,

Just a couple of comments:
1) I believe Sunny is not respresentative of the 'avgerage joe' on the street. The average joe probably has no idea what his/her net worth is let alone calculate it.
2) Sunny-I hope you won't kill me for saying this: Our friend Derek Foster was right when he encouraged us to use DRIPS-not the ones offered by your brokers, but the DRIPS offered by the companies themselves. You win two ways, you win by not paying brokerage fees everytime you buy/sell and you get automatic reinvestment of your fractional dividends. From what I've seen, you spend 1-3% of the amounts you invest on brokage fees to TD Waterhouse.
3) You do not mention what you do with your dividends? Do you pay off your debts, do you use the dividends to pay for your everyday expenses, do you reinvest your dividends?

Some questions to think about.


Anonymous said...

Accountant: so we're looking at a paper loss of 14k (10k new money + 4k loss in value)on Jan 6th. Perhaps what would be more telling would be a detailed cash flow analysis. Denial is a river in Egypt. Sorry, couldn't resist.

Ruth said...

think it would be wise to use the dividends to pay down debt. dividends going back into some loser stocks are not much good either...i know!

does anyone know why is it when oil is up , most of the oil stocks are down? They also said on BNN , it is a trader's market!

Anonymous said...

Definition of denial:

Denial is one of the most common defense mechanisms that we all use, pretending that an uncomfortable thing did not happen.

Yes, agreed a more detailed cash flow analysis would be better. But Sunny didn't withdraw any money from her investments during the year only added new capital. So it's safe to assume that the loss in her net worth is due to market decline. An analysis of her stocks holdings confirms this also.
Maybe Sunny could tell you why her net worth decreased and not increased as it should have considering she added new capital during 2011. And a zero return doesn't reduce your net worth.

To the other anonymous,
Calculating your net worth is not that hard. Assets minus your liabilities. But I do agree lots of people don't know and probably don't want to know as they are heavily indebted.

Anonymous said...

Hi Anonymous,

If you have no debts and you have a stream of dividend income coming in(ie from securities/ bond interest) AND if you have NO debt-your net worth is increasing ever so slowly. HOWEVER, if you spend your dividends then you are not taking advantage of compounding. That's why I asked Sunny what she does with her dividends.


James said...

Having a line of credit at 7% while at reinvesting dividends into new stocks is rediculous. Why don't you pay off your high interest debt first and then worry about investing.

Sunny, when do you plan to pay off your debt, or is it something you plan to keep forever?

@Ruth: BNN will always say it is a traders market or it is a market for active management. That is how their guests get paid, by running mutual funds and portfolios and charging huge fees. I think there is enough academic research out there to suggest that it is never a traders market.

Anonymous said...

Given the decline in some stocks and interest payments , I can't see any gains. It the regular inflow of contributions that give the illusion of rising net worth. Only fooling yourself.

Sunny said...

A close to 90k in debt at an interest annual "fee" of less than 4k... It's really not that bad. I feel comfortable with those numbers.

Debt is a personal thing. Some people - like me - don't care about them. People need to stop to think so negatively when it come to debt. But it's all depend what you do with the debt money and what kind of debt it is.

Myself, I not a huge spender. I am quite careful with my spending. My fun is to invest as much cash possible and I have no regret about my margin, credit cards or credit lines.

I have 0% in 2011, but I have good results in 2009 and 2010. I think 2012 can be a good year but I need to be careful on the way I invest my money. I will need to focus exclusively on blue chips to be able to make it.

My portfolio is a project for the long run, it's a project under construction. Once the Euro get stabilize for good, chances are more job will be created and it will start to get better and more stable on the market.

So far for 2012 it's on quite great.

I don't understand why some people will be purchasing a house. Home insurance, water taxes, municipalities taxes, home repair... how can someone handle all those expenses on a middle class salary? Owning a house doesn't make sense, especially while living in a city. Some people are getting ripe off.

I know the facts. It's not because you don't like my way that I am wrong. I am a too good investor for that.

The buy and hold strategy is the bets of all because if not, you are going to be completely stress out if you just buy-and-sell all the time. Crazy. Traders don't get rich at buying and selling on a continuous basis. They burn themselves by doing so. Unhealthy and stressful. And once you target something as good as JE, why would you spend some valuable time at trying to evaluate the market?

When you have the gems you just hold them and watch it grow.

I have a DRIP so my dividend are getting reinvested. For what is left over, I put the money on credit lines.

If you take 2012 alone, there was no gain, but I have realized capital gain in 2009 and 2010.

While looking at my debt and portfolio, you need to have your mind while open.

Anonymous said...

People buy houses even if it is overvalued. They been taught houses are great investments, never go down. Look what happened in U.S. It is also in the interest of government to keep prices inflated so property tax keep rising. Enslave the citizens.

MFC is stock to buy for the future. 4% yield. Its all beaten up now but one day when the world economy get better.

Anonymous said...

Ack! More head banging! That you to everyone for reiterating what I said a few months ago. This person is insane.

High on Dividends said...

Go with GWO rather than MFC.

Anonymous said...

Why choose GWO over MFC? To choose between is nothing more than a crap shoot.Buy GWO MFC and SLF.Now you don't have to waste time thinking about it.

High on Dividends said...

GWO fundamentals and euro exposure are better, that's why! Do some research....


Thank you

Thank you for visiting!
Blogger Templates